Page 42 of 92 Pages
2000 SECOND AMENDED AND RESTATED
INVESTOR RIGHTS AGREEMENT
THIS 2000 SECOND AMENDED AND RESTATED INVESTOR RIGHTS AGREEMENT is made as
of the 4th day of January 2001, by and between MedicaLogic/Medscape, Inc., an
Oregon corporation (the "Company"), and the shareholders of the Company listed
on the signature pages hereof.
RECITALS
A. As of May 28, 1999, the Company entered into a 1999 Amended and Restated
Investor Rights Agreement with certain investors (as amended and supplemented,
the "1999 MedicaLogic Agreement") that, among other things, provided certain
registration rights to holders of capital stock of the Company.
B. As of August 4, 1999, Medscape, Inc., a Delaware corporation
("Medscape"), entered into an Amended and Restated Stockholders Agreement with
certain of its stockholders (as amended and supplemented, the "1999 Medscape
Agreement") that, among other things, provided certain registration rights to
holders of Medscape capital stock.
C. As of August 3, 1999, Medscape entered into a Registration Rights
Agreement (the "CBS Agreement") with CBS Corporation ("CBS") that provided
certain registration rights to CBS with respect to Medscape common stock owned
by CBS.
D. As of August 25, 1999 and September 8, 1999, the 1999 Medscape Agreement
was amended, among other things, to provide certain registration rights to
America Online, Inc. ("AOL") with respect to Medscape common stock underlying
warrants issued to AOL by Medscape.
E. As of February 21, 2000, the Company, Medscape and Moneypenny Merger
Corp., a Delaware corporation, entered into an Agreement of Reorganization and
Merger (the "Merger Agreement") under which Medscape will become a wholly owned
subsidiary of the Company (the "Merger") and the Company's name will be changed
to MedicaLogic/Medscape, Inc.
F. In accordance with the Merger Agreement, as of May 19, 2000, the Company
entered into a 2000 Amended and Restated Investor Rights Agreement (the "2000
Agreement") with the parties having registration rights prior to the Merger.
G. The Company proposes to sell and issue up to 5,933,332 shares of Series
1 Convertible Redeemable Preferred Stock, without par value (the "Series 1
Preferred Stock"), and warrants to purchase up to 4,537,254 shares of common
stock, without par value (the "Series 1 Warrant Shares") in a closing pursuant
to the Preferred Stock and Warrant Purchase Agreement (the "Series 1 Agreement")
among the Company and certain investors listed on Signature Page I dated as of
December 22, 2000, as amended (the "Series 1 Purchasers").
<PAGE>
Page 43 of 92 Pages
H. As a condition of entering into the Series 1 Agreement, the Series 1
Purchasers have requested that the Company extend to them registration rights
and other rights with respect to the Series 1 Preferred Stock and the Series 1
Warrant Shares.
I. The undersigned shareholders include the holders of more than fifty
percent (50%) of the Company's common stock subject to the 2000 Agreement on the
date hereof as required by Sections 3.7 and 1.14 of the 2000 Agreement.
AGREEMENT
In consideration of the mutual promises and covenants set forth herein, the
parties hereto agree to amend and restate the 2000 Agreement to eliminate
parties that are no longer subject hereto and to further provide as follows:
1. Registration Rights. The Company covenants and agrees as follows:
1.1 Definitions. For purposes of this Section 1:
(a) The term "Act" means the Securities Act of 1933, as amended.
(b) The term "Common Stock" means the common stock of the Company.
(c) The term "Existing Registrable Securities" means all the shares of
Common Stock of Medscape, other than Investor Registrable Securities, that
were owned on the date of the Merger by any Holder who was a party to the
1999 Medscape Agreement.
(d) The term "Form S-3" means such form under the Act as in effect on
the date hereof or any registration form under the Act subsequently adopted
by the SEC which permits inclusion or incorporation of substantial
information by reference to other documents filed by the Company with the
SEC.
(e) The term "Holder" means any person owning or having the right to
acquire Registrable Securities or any assignee thereof in accordance with
Section 1.13 hereof.
(f) The term "Investor Registrable Securities" means all the shares of
Common Stock of Medscape issued upon the conversion of the shares of the
Series C Preferred Stock or Series D Preferred Stock of Medscape; excluding
in all cases, however, (i) any Investor Registrable Securities sold
pursuant to registration under the Act or (ii) any Investor Registrable
Securities sold, subsequent to Medscape's initial public offering of
securities registered under the Act, pursuant to SEC Rule 144 (or similar
or successor rule) promulgated under the Act.
(g) The term "1934 Act" shall mean the Securities Exchange Act of
1934, as amended.
(h) The terms "register," "registered," and "registration" refer to a
registration effected by preparing and filing a registration statement or
similar document in
2
<PAGE>
Page 44 of 92 Pages
compliance with the Act and the declaration or ordering of effectiveness of
such registration statement or document.
(i) The term "Registrable Securities" means (i) the Common Stock of
the Company issued upon conversion of the Company's Series A Preferred
Stock, Series A-1 Preferred Stock, Series C Preferred Stock, Series C-1
Preferred Stock, Series E Preferred Stock, Series E-1 Preferred Stock,
Series F Preferred Stock, Series F-1 Preferred Stock, Series J Preferred
Stock, and Series J-1 Preferred Stock as listed on Signature Page A hereto;
(ii) the Common Stock of the Company purchased pursuant to the Common Stock
Purchase Agreement by and among the Company, Mark A. Leavitt, Richard
Samco, Sequoia Capital Growth Fund, Sequoia Technology Partners III, New
Enterprise Associates VI, Limited Partnership and Stanford University,
dated August 3, 1994, as listed on Signature Page B hereto; (iii) the
Common Stock of the Company issued in the Merger upon conversion of the
Existing Registrable Securities and Investor Registrable Securities ; (iv)
the Common Stock of the Company issued upon exercise of the Medscape
warrants issued to AOL (the "Warrant Shares"); (v) the Series 1 Preferred
Stock; (vi) the Common Stock of the Company issued or issuable upon
conversion of the Series 1 Preferred Stock; (vii) the Series 1 Warrant
Shares; and (viii) any Common Stock of the Company issued as (or issuable
upon the conversion or exercise of any warrant, right or other security
which is issued as) a dividend or other distribution with respect to, or in
exchange for or in replacement of the shares referenced in (i), (ii),
(iii), (iv), (v), (vi) or (vii) above, excluding in all cases, however, any
Registrable Securities sold by a person in a transaction in which such
person's rights under this Section 1 are not assigned or assignable and any
Registrable Securities sold to the public or sold pursuant to Rule 144
promulgated under the Act.
(j) The number of shares of "Registrable Securities then outstanding"
shall be (x) the aggregate number of shares of Common Stock outstanding
which are Registrable Securities plus (y) the number of shares of Common
Stock issuable pursuant to then exercisable or convertible securities which
are Registrable Securities.
(k) The term "SEC" shall mean the Securities and Exchange Commission.
1.2 Request for Registration.
(a) If
(i) the Company shall receive a written request from (A) Holders
of at least fifteen percent (15%) of the Registrable Securities then
outstanding referred to in clauses (i) and (ii) of subsection 1.1(i)
or (B) Holders of at least thirty percent (30%) of the Registrable
Securities then outstanding held by the former holders of the
Company's Series J Preferred Stock (a "Series J Investor") that the
Company file a registration statement under the Act covering the
registration of the Registrable Securities then outstanding, or
(ii) the Company shall receive a written request from (W) Holders
of at least fifty percent (50%) of the Registrable Securities then
outstanding held by
3
<PAGE>
Page 45 of 92 Pages
the former holders of Investor Registrable Securities (excluding
Holders described in clause (X), (Y) or (Z) hereof) as listed on
Signature Page C hereto, (X) any Holder who purchased more than
650,000 shares of the Series D Preferred Stock of Medscape (a "Series
D Holder"), (Y) any Holder who purchased more than 260,000 shares of
the Series E Preferred Stock of Medscape as listed on Signature Page E
hereto (a "Series E Holder"), or (Z) any Holder of Warrant Shares,
that the Company file a registration statement on Form S-1 (or similar
successor forms) under the Act covering the registration of
Registrable Securities issued in exchange for Investor Registrable
Securities, or
(iii) the Company shall receive a written request from Holders of
at least twenty-five percent (25%) of the Registrable Securities
issued or issuable upon conversion of the Series 1 Preferred Stock
that the Company file a registration statement under the Act covering
the Registrable Securities held by such Holders,
then the Company shall, within ten (10) days of the receipt thereof, give
written notice of such request to all Holders in accordance with Section
3.5 (the "Notice of Demand") and shall, subject to the limitations of
subsection 1.2(b), use its reasonable best efforts to effect as soon as
practicable, and in any event within one hundred twenty (120) days) (or
sixty (60) days if such registration under the Act is on Form S-3) of the
receipt of such request, the registration under the Act of all Registrable
Securities that the Holders request to be registered within twenty (20)
days of the receipt of the Notice of Demand, provided that the Registrable
Securities requested by the Holders to be registered pursuant to such
request must have an anticipated aggregate public offering price of not
less than $5,000,000.
(b) If the Holders initiating the registration request hereunder
("Initiating Holders") intend to distribute the Registrable Securities
covered by their request by means of an underwriting, they shall so advise
the Company as a part of their request made pursuant to subsection 1.2(a)
and the Company shall include such information in the written notice
referred to in subsection 1.2(a). The underwriter will be selected by the
Initiating Holders and shall be reasonably acceptable to the Company,
provided that such underwriter shall be of nationally recognized standing
and shall agree to firmly underwrite such offering. In such event, the
right of any Holder to include Registrable Securities in such registration
shall be conditioned upon such Holder's participation in such underwriting
and the inclusion of such Holder's Registrable Securities in the
underwriting (unless otherwise mutually agreed by a majority in interest of
the Initiating Holders and such Holder) to the extent provided herein. All
Holders proposing to distribute their securities through such underwriting
shall (together with the Company as provided in subsection 1.4(e)) enter
into an underwriting agreement in customary form with the underwriter or
underwriters selected for such underwriting. Notwithstanding any other
provisions of this Section 1.2, if the underwriter, with respect to a
registration requested under subsection 1.2(a), advises the Initiating
Holders in writing that marketing factors require a limitation of the
number of shares to be underwritten, then such Initiating Holders shall so
advise all Holders of Registrable Securities which would otherwise be
underwritten pursuant hereto, and the number of shares of Registrable
Securities that may be included in the underwriting shall be allocated
among all Holders thereof, including such Initiating Holders, in proportion
(as nearly as practicable) to the amount of Registrable Securities of the
Company owned by each Holder; provided, however, that the number of shares
of Registrable Securities to be included in
4
<PAGE>
Page 46 of 92 Pages
such underwriting shall not be reduced unless all other securities are
first entirely excluded from the underwriting; and provided, further, that
(i) Registrable Securities held by Holders referred to in subsection
1.2(a)(ii) shall be entirely excluded from the underwriting before any
Registrable Securities held by Holders referred to in subsections 1.2(a)(i)
and 1.2(a)(iii) and (ii) all Registrable Securities held by Holders
referred to in subsection 1.2(a)(i) shall be entirely excluded from the
underwriting before any Registrable Securities held by Holders referred to
in subsection 1.2(a)(iii) are excluded. In a registration pursuant to
subsection 1.2(a), if Registrable Securities held by a Series J Investor
are excluded from the registration pursuant to the previous sentence as a
result of election of Holders other than Series J Investors to participate
in the registration, then that registration will not be deemed to be a
registration requested by the Series J Investors for the purposes of
Section 1.2(d)(i).
(c) Notwithstanding the foregoing, if the Company shall furnish to
Holders requesting a registration statement pursuant to this Section 1.2, a
certificate signed by the Chief Executive Officer of the Company stating
that in the good faith judgment of the Board of Directors of the Company,
it would materially interfere with any material financing, acquisition,
corporate reorganization or merger or other material transaction involving
the Company and it is therefore essential to defer the filing of such
registration statement, the Company shall have the right to defer taking
action with respect to such filing for a period of not more than ninety
(90) days after receipt of the request of the Initiating Holders; provided,
however, that the Company may not utilize this right more than once in any
twelve-month period.
(d) In addition, the Company shall not be obligated to effect, or to
take any action to effect,
(i) any registration pursuant to subsection 1.2(a)(i):
(A) After the Company has effected three (3) registrations
pursuant to subsection 1.2(a)(i), two (2) of which may only be
initiated by Series J Investors under subsection 1.2(a)(i)(B),
and such registrations have been declared or ordered effective;
or
(B) During the period starting with the date sixty (60) days
prior to the Company's good faith estimate of the date of filing
of, and ending on a date ninety (90) days after the effective
date of, a registration subject to Section 1.3 hereof, provided
that the Company is actively employing in good faith all
reasonable efforts to cause such registration statement to become
effective; or
(ii) any registration pursuant to subsection 1.2(a)(ii):
(A) After the Company has effected seven (7) registrations
pursuant to subsection 1.2(a)(ii), two (2) of which may only be
initiated by a Series D Holder, one (1) of which may only be
initiated by a Series E Holder, two (2) of which may only be
initiated by a Holder of Warrant Shares, and two (2) of which may
only be initiated by Holders who are not Series D Holders, Series
E Holders or Holders of Warrant Shares; or
5
<PAGE>
Page 47 of 92 Pages
(B) During the period starting with the date sixty (60) days
prior to the Company's good faith estimate of the date of filing
of, and ending on a date ninety (90) days after the effective
date of, a registration subject to Section 1.3 hereof, provided
that the Company is actively employing in good faith all
reasonable efforts to cause such registration statement to become
effective; or
(C) If the Initiating Holders propose to dispose of shares
of Registrable Securities which may be immediately registered on
Form S-3 pursuant to a request made under Section 1.12 hereof.
(iii) any registration pursuant to subsection 1.2(a)(iii):
(A) After the Company has effected three (3) registrations
pursuant to subsection 1.2(a)(iii); or
(B) During the period starting with the date sixty (60) days
prior to the Company's good faith estimate of the date of filing
of, and ending on a date ninety (90) days after the effective
date of, a registration subject to Section 1.3 hereof, provided
that the Company is actively employing in good faith all
reasonable efforts to cause such registration statement to become
effective
1.3 Company Registration. If (but without any obligation to do so) the
Company proposes to register (including for this purpose a registration effected
by the Company for shareholders other than the Holders) any of its stock or
other securities under the Act in connection with the public offering of such
securities solely for cash (other than a registration relating solely to the
sale of securities to participants in a Company stock plan, a registration on
any form which does not include substantially the same information as would be
required to be included in a registration statement covering the sale of the
Registrable Securities or a registration in which the only Common Stock being
registered is Common Stock issuable upon conversion of debt securities which are
also being registered), the Company shall, at such time, promptly, but at least
thirty (30) days prior to filing such registration statement, give each Holder
written notice of such registration in accordance with Section 3.5 (the
"Piggy-Back Notice"). Upon the written request of each Holder given within
twenty (20) days after receipt of the Piggy-Back Notice, the Company shall,
subject to the provisions of Section 1.8, cause to be registered under the Act
all of the Registrable Securities that each such Holder has requested to be
registered.
1.4 Obligations of the Company. Whenever required under this Section 1 to
effect the registration of any Registrable Securities, the Company shall, as
expeditiously as reasonably possible:
(a) Prepare and file with the SEC a registration statement with
respect to such Registrable Securities and use its diligent efforts to
cause such registration statement to become effective, and, upon the
request of the Holders of a majority of the Registrable Securities
registered thereunder, keep such registration statement effective for a
period of up to one
6
<PAGE>
Page 48 of 92 Pages
hundred eighty (180) days; provided, however, that (i) such 180-day period
shall be extended for a period of time equal to the period the Holder
refrains from selling any securities included in such registration at the
request of an underwriter of Common Stock (or other securities) of the
Company; and (ii) in the case of any registration of Registrable Securities
on Form S-3 which are intended to be offered on a continuous or delayed
basis, such 180-day period shall be extended, if necessary, to keep the
registration statement effective until all such Registrable Securities are
sold, provided that Rule 415, or any successor rule under the Act, permits
an offering on a continuous or delayed basis; and provided further that
applicable rules under the Act governing the obligation to file a
post-effective amendment permit, in lieu of filing a post-effective
amendment which (I) includes any prospectus required by Section 10(a)(3) of
the Act or (II) reflects facts or events representing a material or
fundamental change in the information set forth in the registration
statement, the incorporation by reference of information required to be
included in (I) and (II) above to be contained in periodic reports filed
pursuant to Section 13 or 15(d) of the 1934 Act in the registration
statement.
(b) Prepare and file with the SEC such amendments and supplements to
such registration statement and the prospectus used in connection with such
registration statement as may be necessary to comply with the provisions of
the Act with respect to the disposition of all securities covered by such
registration statement.
(c) Furnish to the Holders such numbers of copies of a prospectus,
including a preliminary prospectus, in conformity with the requirements of
the Act, and such other documents as they may reasonably request in order
to facilitate the disposition of Registrable Securities owned by them.
(d) Use its reasonable best efforts to register and qualify the
securities covered by such registration statement under such other
securities or Blue Sky laws of such jurisdictions as shall be reasonably
requested by the Holders; provided that the Company shall not be required
in connection therewith or as a condition thereto to qualify to do business
or to file a general consent to service of process in any such states or
jurisdictions, unless the Company is already subject to service in such
jurisdiction and except as may be required by the Act.
(e) In the event of any underwritten public offering, enter into and
perform its obligations under an underwriting agreement, in usual and
customary form, with the managing underwriter of such offering. Each Holder
participating in such underwriting shall also enter into and perform its
obligations under such an agreement.
(f) Notify each Holder of Registrable Securities covered by such
registration statement at any time when a prospectus relating thereto is
required to be delivered under the Act of the happening of any event as a
result of which the prospectus included in such registration statement, as
then in effect, includes an untrue statement of a material fact or omits to
state a material fact required to be stated therein or necessary to make
the statements therein not misleading in the light of the circumstances
then existing.
7
<PAGE>
Page 49 of 92 Pages
(g) Cause all such Registrable Securities registered pursuant
hereunder to be listed on each securities exchange on which similar
securities issued by the Company are then listed.
(h) Provide a transfer agent and registrar for all Registrable
Securities registered pursuant hereunder and a CUSIP number for all such
Registrable Securities, in each case not later than the effective date of
such registration.
(i) Furnish, at the request of any Holder requesting registration of
Registrable Securities pursuant to this Section 1, on the date that such
Registrable Securities are delivered to the underwriters for sale in
connection with a registration pursuant to this Section 1, if such
securities are being sold through underwriters, or, if such securities are
not being sold through underwriters, on the date that the registration
statement with respect to such securities becomes effective, (i) an
opinion, dated such date, of the counsel representing the Company for the
purposes of such registration, in form and substance as is customarily
given to underwriters in an underwritten public offering, addressed to the
underwriters, if any, and to the Holders requesting registration of
Registrable Securities and (ii) a letter dated such date, from the
independent certified public accountants of the Company, in form and
substance as is customarily given by independent certified public
accountants to underwriters in an underwritten public offering, addressed
to the underwriters, if any, and to the Holders requesting registration of
Registrable Securities.
1.5 Furnish Information. It shall be a condition precedent to the
obligations of the Company to take any action pursuant to this Section 1 with
respect to the Registrable Securities of any selling Holder that such Holder
shall furnish to the Company such information regarding itself, the Registrable
Securities held by it, and the intended method of disposition of such securities
as shall be required to effect the registration of such Holder's Registrable
Securities.
1.6 Expenses of Demand Registration. All expenses other than underwriting
discounts and commissions incurred in connection with registrations, filings or
qualifications pursuant to Section 1.2 (which right may be assigned as provided
in Section 1.13), including (without limitation) all registration, filing,
qualification, printers' and accounting fees, fees and disbursements of counsel
for the Company, and the reasonable fees and disbursements of one counsel for
the selling Holders shall be borne by the Company; provided, however, that such
counsel shall submit reasonably detailed invoices for review by the Company's
General Counsel prior to payment; and provided further, however, that the
Company shall not be required to pay for any expenses of any registration
proceeding begun pursuant to Section 1.2 if the registration request is
subsequently withdrawn at the request of the Holders of a majority of the
Registrable Securities to be registered (in which case all participating Holders
shall bear such expenses), unless the Initiating Holders agree to forfeit the
applicable demand registration right pursuant to Section 1.2; provided further,
however, that if at the time of such withdrawal, the Holders have learned of a
material adverse change in the condition, business, or prospects of the Company
from that known to the Holders at the time of their request and have withdrawn
the request with reasonable promptness following disclosure by the Company of
such material adverse change,
8
<PAGE>
Page 50 of 92 Pages
then the Holders shall not be required to pay any of such expenses and shall
retain their rights pursuant to Section 1.2.
1.7 Expenses of Company Registration. The Company shall bear and pay all
expenses incurred in connection with any registration, filing or qualification
of Registrable Securities with respect to the registrations pursuant to Section
1.3 for each Holder (which right may be assigned as provided in Section 1.13),
including (without limitation) all registration, filing, qualification,
printers' and accounting fees, fees and disbursements of counsel for the
Company, and the reasonable fees and disbursements of one counsel for the
selling Holders; provided, however, that such counsel shall submit reasonably
detailed invoices for review by the Company's General Counsel prior to payment;
but excluding underwriting discounts and commissions relating to Registrable
Securities.
1.8 Underwriting Requirements. In connection with any offering involving an
underwriting of shares of the Company's capital stock, the Company shall not be
required under Section 1.3 to include any of the Holders' securities in such
underwriting unless they accept the terms of the underwriting as agreed upon
between the Holders of a majority of the Registrable Securities that indicated
they would like to be included in the underwriting, the Company and the
underwriters selected by it (or by other persons entitled to select the
underwriters), and then only in such quantity as the underwriters determine in
their sole discretion will not jeopardize the success of the offering by the
Company. If the total amount of securities, including Registrable Securities,
requested by shareholders to be included in such offering exceeds the amount of
securities sold other than by the Company that the underwriters determine in
their sole discretion is compatible with the success of the offering, then the
Company shall be required to include in the offering only that number of such
securities, including Registrable Securities, which the underwriters determine
in their sole discretion will not jeopardize the success of the offering (the
securities so included to be apportioned pro rata among the selling shareholders
according to the total amount of securities entitled and requested to be
included therein owned by each selling shareholder or in such other proportions
as shall mutually be agreed to by such selling shareholders) but in no event
shall (i) the amount of securities of the selling Holders included in the
offering be reduced below thirty percent (30%) of the total amount of securities
included in such offering, or (ii) notwithstanding (i) above, Section 1.2
governs the exclusion of shares being sold by a shareholder exercising a demand
registration right granted thereunder. For purposes of the preceding
parenthetical concerning apportionment, for any selling shareholder which is a
holder of Registrable Securities and which is a partnership or corporation, the
partners, retired partners and shareholders of such holder, or the estates and
family members of any such partners and retired partners and any trusts for the
benefit of any of the foregoing persons shall be deemed to be a single "selling
shareholder," and any pro-rata reduction with respect to such "selling
shareholder" shall be based upon the aggregate amount of shares carrying
registration rights owned by all entities and individuals included in such
"selling shareholder," as defined in this sentence.
1.9 Delay of Registration. No Holder shall have any right to obtain or seek
an injunction restraining or otherwise delaying any such registration as the
result of any controversy that might arise with respect to the interpretation or
implementation of this Section 1.
9
<PAGE>
Page 51 of 92 Pages
1.10 Indemnification. In the event any Registrable Securities are included
in a registration statement under this Section 1:
(a) To the extent permitted by law, the Company will indemnify and
hold harmless each Holder, any underwriter (as defined in the Act) for such
Holder and each person, if any, who controls such Holder or underwriter
within the meaning of the Act or the 1934 Act, against any losses, claims,
damages, or liabilities (joint or several) to which they may become subject
under the Act, the 1934 Act or other federal or state law, insofar as such
losses, claims, damages, or liabilities (or actions in respect thereof)
arise out of or are based upon any of the following statements, omissions
or violations (collectively a "Violation"): (i) any untrue statement or
alleged untrue statement of a material fact contained in such registration
statement, including any preliminary prospectus or final prospectus
contained therein or any amendments or supplements thereto, (ii) the
omission or alleged omission to state therein a material fact required to
be stated therein, or necessary to make the statements therein not
misleading, or (iii) any violation or alleged violation by the Company of
the Act, the 1934 Act, any state securities law, or any rule or regulation
promulgated under the Act, and the Company will pay to each such Holder,
underwriter or controlling person, as incurred, any legal or other expenses
reasonably incurred by them in connection with investigating or defending
any such loss, claim, damage, liability, or action; provided, however, that
the indemnity agreement contained in this subsection 1.10(a) shall not
apply to amounts paid in settlement of any such loss, claim, damage,
liability, or action if such settlement is effected without the consent of
the Company (which consent shall not be unreasonably withheld), nor shall
the Company be liable in any such case for any such loss, claim, damage,
liability, or action to the extent that it arises out of or is based upon a
Violation which occurs in reliance upon and in conformity with written
information furnished expressly for use in connection with such
registration by any such Holder, underwriter or controlling person.
(b) To the extent permitted by law, each selling Holder will indemnify
and hold harmless the Company, each of its directors, each of its officers
who has signed the registration statement, each person, if any, who
controls the Company within the meaning of the Act, any underwriter, any
other Holder selling securities in such registration statement and any
controlling person or any such underwriter or Holder, against any losses,
claims, damages, or liabilities (joint or several) to which any of the
foregoing persons may become subject, under the Act, the 1934 Act or other
federal or state law, insofar as such losses, claims, damages, or
liabilities (or actions in respect thereto) arise out of or are based upon
any Violation, in each case to the extent (and only to the extent) that
such Violation occurs in reliance upon and in conformity with written
information furnished by such Holder expressly for use in connection with
such registration; and each such Holder will pay, as incurred, any legal or
other expenses reasonably incurred by any person intended to be indemnified
pursuant to this subsection 1.10(b), in connection with investigating or
defending any such loss, claim, damage, liability or action; provided,
however, that the indemnity agreement contained in this subsection 1.10(b)
shall not apply to amounts paid in settlement of any such loss, claim,
damage, liability, or action if such settlement is effected without the
consent of the Holder, which consent shall not be unreasonably withheld;
provided, however, that in no event shall any indemnity under this
subsection 1.10(b) exceed the net proceeds from the offering received by
such Holder.
10
<PAGE>
Page 52 of 92 Pages
(c) Promptly after receipt by an indemnified party under this Section
1.10 of notice of the commencement of any action (including any
governmental action), such indemnified party will, if a claim in respect
thereof is to be made against any indemnifying party under this Section
1.10, deliver to the indemnifying party a written notice of the
commencement thereof and the indemnifying party shall have the right to
participate in, and, to the extent the indemnifying party so desires,
jointly with any other indemnifying party similarly notified, to assume the
defense thereof with counsel mutually satisfactory to the parties;
provided, however, that an indemnified party (together with all other
indemnified parties which may be represented without conflict by one
counsel) shall have the right to retain one separate counsel, with the fees
and expenses to be paid by the indemnifying party, if representation of
such indemnified party by the counsel retained by the indemnifying party
would be inappropriate due to actual or potential differing interests
between such indemnified party and any other party represented by such
counsel in such proceeding. The failure to deliver written notice to the
indemnifying party within a reasonable time of the commencement of any such
action, if prejudicial to its ability to defend such action, shall relieve
such indemnifying party of any liability to the indemnified party under
this Section 1.10, but the omission so to deliver written notice to the
indemnifying party will not relieve it of any liability that it may have to
any indemnified party otherwise than under this Section 1.10.
(d) If the indemnification provided for in this Section 1.10 is held
by a court of competent jurisdiction to be unavailable to an indemnified
party with respect to any loss, liability, claim, damage, or expense
referred to herein, then the indemnifying party, in lieu of indemnifying
such indemnified party hereunder, shall contribute to the amount paid or
payable by such indemnified party as a result of such loss, liability,
claim, damage, or expense in such proportion as is appropriate to reflect
the relative fault of the indemnifying party on the one hand and of the
indemnified party on the other in connection with the statements or
omissions that resulted in such loss, liability, claim, damage, or expense
as well as any other relevant equitable considerations. The relative fault
of the indemnifying party and of the indemnified party shall be determined
by reference to, among other things, whether the untrue or alleged untrue
statement of a material fact or the omission to state a material fact
relates to information supplied by the indemnifying party or by the
indemnified party and the parties' relative intent, knowledge, access to
information, and opportunity to correct or prevent such statement or
omission. Notwithstanding the foregoing, (i) no Holder shall be required to
contribute any amount in excess of the public offering price of all
Registrable Securities offered and sold by such Holder pursuant to such
registration statement, and (ii) no person guilty of fraudulent
misrepresentation (within the meaning of Section 11(f) of the Act) shall be
entitled to contribution from any person who was not guilty of such
fraudulent misrepresentation.
(e) The obligations of the Company and Holders under this Section 1.10
shall survive the completion of any offering of Registrable Securities in a
registration statement under this Section 1, and otherwise.
1.11 Reports Under Securities Exchange Act of 1934. With a view to making
available to the Holders the benefits of Rule 144 promulgated under the Act and
any other rule or regulation of the SEC that may at any time permit a Holder to
sell securities of the Company to the public without registration or pursuant to
a registration on Form S-3, the Company agrees to:
11
<PAGE>
Page 53 of 92 Pages
(a) make and keep public information available, as those terms are
understood and defined in SEC Rule 144, at all times;
(b) take such action, including the voluntary registration of its
Common Stock under Section 12 of the 1934 Act, as is necessary to enable
the Holders to utilize Form S-3 for the sale of their Registrable
Securities, such action to be taken as soon as practicable after the end of
the fiscal year in which the first registration statement filed by the
Company for the offering of its securities to the general public is
declared effective;
(c) file with the SEC in a timely manner all reports and other
documents required of the Company under the Act and the 1934 Act; and
(d) furnish to any Holder, so long as the Holder owns any Registrable
Securities, forthwith upon request (i) a written statement by the Company
that it has complied with the reporting requirements of SEC Rule 144, the
Act, and the 1934 Act, or that it qualifies as a registrant whose
securities may be resold pursuant to Form S-3 (at any time after it so
qualifies), (ii) a copy of the most recent annual or quarterly report of
the Company and such other reports and documents so filed by the Company,
and (iii) such other information as may be reasonably requested in availing
any Holder of any rule or regulation of the SEC which permits the selling
of any such securities without registration or pursuant to such form.
1.12 Form S-3 Registration. In case the Company shall receive from any
Holder or Holders a written request or requests that the Company effect a
registration on Form S-3 and any related qualification or compliance with
respect to all or a part of the Registrable Securities owned by such Holder or
Holders, the Company will:
(a) promptly give written notice of the proposed registration, and any
related qualification or compliance, to all other Holders in accordance
with Section 3.5 (the "S-3 Notice"); and
(b) as soon as practicable, effect such registration and all such
qualifications and compliances as may be so requested and as would permit
or facilitate the sale and distribution of all or such portion of such
Holder's or Holders' Registrable Securities as are specified in such
request, together with all or such portion of the Registrable Securities of
any other Holder or Holders joining in such request as are specified in a
written request given within twenty (20) days after receipt of the S-3
Notice; provided, however, that the Company shall not be obligated to
effect any such registration, qualification or compliance, pursuant to this
Section 1.12: (1) if Form S-3 is not available for offering by the Holders;
(2) if the Holders, together with the holders of any other securities of
the Company entitled to inclusion in such registration, propose to sell
Registrable Securities and such other securities (if any) at an aggregate
price to the public (net of any underwriters' discounts or commissions) of
less than $1,000,000; (3) if the Company shall furnish to the Holders a
certificate signed by the President of the Company stating that in the good
faith judgment of the Board of Directors of the Company, it would
materially interfere with any material financing, acquisition, corporate
reorganization or merger or other material transaction involving the
Company, in which event the Company shall have the
12
<PAGE>
Page 54 of 92 Pages
right to defer the filing of the Form S-3 registration statement for a
period of not more than one hundred twenty (120) days after receipt of the
request of the Holder or Holders under this Section 1.12; provided,
however, that the Company shall not utilize this right more than once in
any twelve (12) month period; (4) if the Company has, within the six (6)
month period preceding the date of such request, already effected one
registration on Form S-3 for the Holders pursuant to this Section 1.12; or
(5) in any particular jurisdiction in which the Company would be required
to qualify to do business or to execute a general consent to service of
process in effecting such registration, qualification or compliance.
(c) Subject to the foregoing, the Company shall file a registration
statement covering the Registrable Securities and other securities so
requested to be registered as soon as practicable after receipt of the
request or requests of the Holders. The Company shall bear and pay all
expenses incurred in connection with a registration requested pursuant to
Section 1.12, including (without limitation) all registration, filing,
qualification, printer's and accounting fees, fees and disbursements of
counsel for the Company, and the reasonable fees and disbursements of one
counsel for the selling Holder or Holders; provided, however, that such
counsel shall submit reasonably detailed invoices for review by the
Company's General Counsel prior to payment; but excluding underwriting
discounts and commissions relating to Registrable Securities; and provided
further, that the Company shall not be obligated to pay registration
expenses under this paragraph if the Company has already effected two
registrations on Form S-3 pursuant to this Section 1.12 after the date
hereof. Registrations effected pursuant to this Section 1.12 shall not be
counted as registrations effected pursuant to Section 1.2 or 1.3.
1.13 Assignment of Registration Rights. The rights to cause the Company to
register Registrable Securities pursuant to this Section 1 may be assigned (but
only with all related obligations) by a Holder to a transferee or assignee of
such securities, provided: (a) the Company is, within a reasonable time after
such transfer, furnished with written notice of the name and address of such
transferee or assignee and the securities with respect to which such
registration rights are being assigned; (b) such transferee or assignee acquires
from the Holder more than 100,000 shares; (c) such transferee or assignee agrees
in writing to be bound by and subject to the terms and conditions of this
Agreement, including without limitation the provisions of Section 1.15 below;
and (d) such assignment shall be effective only if immediately following such
transfer the further disposition of such securities by the transferee or
assignee is restricted under the Act.
1.14 Limitations on Subsequent Registration Rights. From and after the date
of this Agreement, the Company shall not, without the prior written consent of
the Holders of a majority of the outstanding Registrable Securities, enter into
any agreement with any holder or prospective holder of any securities of the
Company which would allow such holder or prospective holder (a) to include such
securities in any registration filed under Section 1.2 hereof, unless under the
terms of such agreement, such holder or prospective holder may include such
securities in any such registration only to the extent that the inclusion of
such securities will not reduce the amount of the Registrable Securities of the
Holders which is included or (b) to make a demand registration which could
result in such registration statement being declared effective within one
hundred twenty (120) days of the effective date of any registration effected
pursuant to Section 1.2. If the Company grants registration rights to holders of
any security of
13
<PAGE>
Page 55 of 92 Pages
the Company which are more favorable to such holders than the registration
rights granted hereunder without the prior written consent of the Holders of a
majority of the outstanding Registrable Securities, then such more favorable
registration rights shall also be deemed to be granted to the Holders of
Registrable Securities hereunder, and the Company covenants and agrees to take
any and all steps necessary to modify the terms of this Agreement to so provide.
1.15 [Deleted]
1.16 Termination of Registration Rights.
(a) No Holder shall be entitled to exercise any right provided for in this
Section 1 after December 10, 2009.
(b) In addition, the right of any Holder to request registration or
inclusion in any registration pursuant to Section 1 shall terminate on such date
that all shares of Registrable Securities held or entitled to be held upon
conversion by such Holder may immediately be sold under Rule 144 during any
90-day period; provided, however, that the provisions of this Section 1.16(b)
shall not apply to any Holder who owns at least one percent (1%) of the
Company's outstanding Common Stock.
2. Covenants of the Company.
2.1 Right of First Offer. Subject to the terms and conditions specified in
this Section 2.1, the Company hereby grants to each holder of at least 300,000
shares of Series 1 Preferred Stock or Common Stock issued upon the conversion of
shares of Series 1 Preferred Stock (or a combination thereof) a right of first
offer to purchase its Pro Rata Share (as hereinafter defined) (in whole or in
part) with respect to future sales by the Company of its Shares (as hereinafter
defined). For purposes of this Section 2.1, a holder's "Pro Rata Share" of
Shares shall mean that number of Shares that equals the proportion that (i) the
number of shares of Common Stock issuable upon conversion of the Series 1
Preferred Stock plus the Series 1 Warrant Shares plus any other shares of Common
Stock, in each case, held by such holder (other than shares purchased in the
open market or directly from the Company not pursuant to this Section 2.1) bears
to (ii) the total number of shares of Common Stock of the Company then
outstanding (assuming full conversion and exercise of all convertible or
exercisable securities then outstanding).
Each time the Company proposes to offer any shares of, or securities
convertible into, exercisable or exchangeable for any shares of any class of its
capital stock ("Shares"), the Company shall first make an offering of such
Shares to each such holder of Series 1 Preferred Stock in accordance with the
following provisions:
(a) The Company shall deliver a notice by confirmed facsimile
transmission, certified mail or a nationally recognized overnight courier
service ("Notice") to each holder of Series 1 Preferred Stock stating (i)
its bona fide intention to offer such Shares, (ii) the number of such
Shares to be offered, and (iii) the price and a summary of the terms, if
any, upon which it proposes to offer such Shares.
14
<PAGE>
Page 56 of 92 Pages
(b) By written notification received by the Company within ten (10)
calendar days after receipt of the Notice, each holder of Series 1
Preferred Stock may elect to purchase or obtain, at the price and on the
terms specified in the Notice, up to its Pro Rata Share of such Shares.
(c) If all Shares that the holders of Series 1 Preferred Stock are
entitled to obtain pursuant to Section 2.1(b) are not elected to be
obtained as provided in Section 2.1(b) hereof, the Company may, during the
sixty (60)-day period following the expiration of the period provided in
Section 2.1(b) hereof, offer the remaining unsubscribed portion of such
Shares to any person or persons at a price not less than, and upon terms no
more favorable to the offeree than those specified in the Notice. If the
Company does not enter into an agreement for the sale of the Shares within
such period, or if such agreement is not consummated within thirty (30)
days of the execution thereof, the right provided hereunder shall be deemed
to be revived and such Shares shall not be offered unless first reoffered
to the holders of Series 1 Preferred Stock in accordance herewith.
(d) The right of first offer in this Section 2.1 shall not be
applicable to (i) shares of Common Stock issued pursuant to a dividend or
distribution to shareholders generally, including a split or subdivision of
the outstanding shares of the Company; (ii) shares of Common Stock issuable
or issued to employees, consultants or directors of this corporation
pursuant to a stock option plan or stock purchase plan approved by the
Board of Directors of the Corporation on or prior to the date of this
Agreement; (iii) shares of Common Stock issued to Baylor College of
Medicine or assignees in connection with the sale of software licenses by
the Corporation in the Houston, Texas market through December 31, 2002;
(iv) shares of Common Stock issuable or issued in consideration for
services rendered to the Corporation or its subsidiaries (other than shares
issuable or issued pursuant to (ii) above), in an aggregate amount not to
exceed 200,000 shares per annum; (v) shares of Common Stock issuable or
issued in connection with acquisitions, business combinations or strategic
alliances, including corporate partnering agreements, not to exceed 500,000
shares in the aggregate (as adjusted for stock dividends, splits and
combinations); (vi) shares of Common Stock the issuance of which has been
approved in writing by the holders of at least a majority of the then
outstanding shares of Series 1 Preferred Stock; (vii) shares of Common
Stock issuable upon (w) the conversion of the Series 1 Preferred Stock, (x)
the exercise of the Series 1 Warrants, (y) the exercise of the warrant
dated February 15, 2000, issued to Lazard Freres & Co. LLC, not to exceed
32,300 shares in the aggregate (as adjusted for stock dividends, splits and
combinations), or (z) the exercise of the warrants dated September 3, 1999,
issued to America Online, not to exceed 727,911 shares in the aggregate (as
adjusted for stock dividends, splits and combinations); (viii) the exercise
of the Warrant dated September 14, 1999, issued to Stoel Rives LLP, not to
exceed 10,000 shares (as adjusted for stock dividends, splits, and
combinations); or (ix) shares of Common Stock issued pursuant to Sections
2.3 and 2.4 of the Stock Purchase Agreement, dated April 17, 2000, between
the Company and the founders of AnywhereMD.com, Inc. (including pursuant to
employment agreements of even date therewith between the Company and such
founders), not to exceed 600,000 shares in the aggregate (as adjusted for
stock dividends, splits and combinations).
15
<PAGE>
Page 57 of 92 Pages
2.2 Tax Matters.
(a) The Company covenants that it will not become a U.S. real property
holding corporation ("USRPHC") at any time while any Series 1 Purchaser
owns any Registrable Securities or any securities exercisable or
convertible into Registrable Securities (the "Stock").
(b) In the event that a Series 1 Purchaser desires to sell or dispose
of any Stock, and upon demand by such Series 1 Purchaser, the Company
agrees to deliver to such Series 1 Purchaser a letter (the "Letter") which
complies with Sections 1.1445-2(c)(3) and 1.897-2(h) of the Treasury
Regulations during the period equal to the lesser of (i) the period
beginning five years prior to the date of the Letter through the date of
the Letter and (ii) the period from the date of this Agreement through the
date of the Letter. The Letter shall be delivered to the Series 1 Purchaser
one business day prior to the close of any sale or disposition of the Stock
by the Series 1 Purchaser (the "Delivery Date"). The Letter shall be dated
as of the Delivery Date and signed by a corporate officer who must verify
under penalties of perjury that the statement is correct to his knowledge
and belief pursuant to Section 1.897-2(h) of the Treasury Regulations.
(c) The parties hereto agree and acknowledge that, unless in the
opinion of outside counsel to the relevant party such action is necessary
to comply with its obligations under the Internal Revenue Code of 1986, as
amended (the "Code"), (i) no party hereto will take the position that any
amount will be includable in income with respect to the Series 1 Preferred
Stock under Section 305 of the Code and that no parties shall file Tax
Returns (as defined in the Series 1 Agreement) to the contrary (the
"Reporting Agreement") and (ii) no party hereto shall take any position
inconsistent with the Reporting Agreement upon examination of any Tax
Return in any refund claim, in any litigation or otherwise.
3. Agreement to Vote Shares.
3.1 Voting. Each of the undersigned shareholders agrees that at any meeting
of the shareholders of the Company, however called, and in any action taken by
written consent of shareholders of the Company without a meeting, the
shareholder shall vote the shareholder's shares of Common Stock and/or Series 1
Preferred Stock, and shall cause any holder of record of the shareholder's
shares of Common Stock or Series 1 Preferred Stock, to vote in favor of the
shareholder approval contemplated by Section 4.2(b) of the Preferred Stock and
Warrant Purchase Agreement dated as of December __, 2000 between the Company and
certain investors named therein.
4. Miscellaneous.
4.1 Successors and Assigns. Except as otherwise provided herein, the terms
and conditions of this Agreement shall inure to the benefit of and be binding
upon the respective successors and assigns of the parties (including transferees
of any shares of Registrable Securities). Nothing in this Agreement, express or
implied, is intended to confer upon any party other than the parties hereto or
their respective successors and assigns any rights, remedies,
16
<PAGE>
Page 58 of 92 Pages
obligations, or liabilities under or by reason of this Agreement, except as
expressly provided in this Agreement.
4.2 Governing Law. This Agreement shall be governed by and construed under
the laws of the State of Oregon.
4.3 Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
4.4 Titles and Subtitles. The titles and subtitles used in this Agreement
are used for convenience only and are not to be considered in construing or
interpreting this Agreement.
4.5 Notices. Unless otherwise provided, any notice required or permitted
under this Agreement shall be given in writing and shall be deemed effectively
given upon personal delivery to the party to be notified or upon deposit with
the United States Post Office, by registered or certified mail, postage prepaid
or upon delivery to a recognized courier service and addressed to the party to
be notified at the address indicated for such party on the signature pages
hereof, or at such other address as such party may designate by ten (10) days'
advance written notice to the other parties. Any notice given to the Company
under this Section 3.5 shall be copied via email to [email protected].
4.6 Expenses. If any action at law or in equity is necessary to enforce or
interpret the terms of this Agreement, the prevailing party shall be entitled to
reasonable attorneys' fees, costs and necessary disbursements in addition to any
other relief to which such party may be entitled.
4.7 Amendments and Waivers. Any term of this Agreement may be amended and
the observance of any term of this Agreement may be waived (either generally or
in a particular instance and either retroactively or prospectively), only with
the written consent of the Company and the holders of more than two-thirds (2/3)
of the Registrable Securities then outstanding, except as follows:
(a) any amendment or waiver affecting only the rights of holders of
Registrable Securities described in subsection 1.1(i)(i) shall require only
the consent of the Company and the holders of more than fifty percent (50%)
of such Registrable Securities, except that any amendment or waiver
affecting the rights of Series J Investors shall require the consent of the
holders of more than fifty percent (50%) of the Registrable Securities held
by the Series J Investors;
(b) any amendment or waiver affecting only the rights of holders of
Registrable Securities held by former Holders of Investor Registrable
Securities, excluding Series D Holders and Series E Holders, shall require
only the consent of the Company and the holders of more than sixty-six and
two-thirds percent (66 ?%) of such Registrable Securities;
17
<PAGE>
Page 59 of 92 Pages
(c) any amendment or waiver affecting only the rights of holders of
Registrable Securities who were Series D Holders shall require only the
consent of the Company and the holders of more than sixty-six and
two-thirds percent (66 2/3%) of such Registrable Securities;
(d) any amendment or waiver affecting only the rights of holders of
Registrable Securities who were Series E Holders shall require only the
consent of the Company and the holders of more than fifty percent (50%) of
such Registrable Securities; and
(e) any amendment or waiver affecting only the rights of holders of
Registrable Securities described in subsections 1.1(i)(v), 1.1(i)(vi) and
1.1(i)(vii) shall require only the consent of the Company and the holders
of more than sixty-six and two-thirds percent (66 2/3%) of such Registrable
Securities, acting as a single class.
Any amendment or waiver effected in accordance with this paragraph shall be
binding upon each holder of any Registrable Securities then outstanding, each
future holder of such Registrable Securities and the Company.
4.8 Severability. If one or more provisions of this Agreement are held to
be unenforceable under applicable law, such provision shall be excluded from
this Agreement and the balance of the Agreement shall be interpreted as if such
provision were so excluded and shall be enforceable in accordance with its
terms.
4.9 Aggregation of Stock. All shares of Registrable Securities (including
the Common Stock issuable upon conversion thereof), as applicable, held or
acquired by a Holder shall be aggregated together for the purpose of determining
the availability of any rights under this Agreement.
4.10 Entire Agreement; Amendment; Waiver. This Agreement constitutes the
full and entire understanding and agreement between the parties with regard to
the subjects hereof and supersedes the 2000 Agreement.
18
<PAGE>
Page 60 of 92 Pages
IN WITNESS WHEREOF, the parties have executed this Agreement as of the date
first above written.
COMPANY: MEDICALOGIC, INC.
By:
---------------------------------------
Printed Name: David Moffenbeier
Title: Chief Executive Officer
SHAREHOLDERS: See Attached Signature Pages
19
